Aberdeen Group Plc

Good morning everyone and thank you very much for joining Siobhan and me for Aberdeen's half year 26 results presentation on what I know is a busy morning for you. Today we're here in our Manchester office, the headquarters of Interactive Investor. We're hoping to be the first FTSE company to present results from Manchester under the new Prime Minister. Anyway, I'm going to begin with an overview of our strategic and financial performance and then Siobhan will take you through the financials in a little more detail before we return to Q&A. So just let me start with a reminder of our ambition. Our aim is to be the UK's leading wealth investments group and our purpose is simple, enabling our clients to be better investors. We're building on a strong foundation. Interactive Investor is the UK's number one direct-to-consumer platform measured by net flows and now has over £100 billion of customer assets. Advisor is the UK's third-largest advice platform, serving over half of the UK advisor market. And Investment is a specialist asset manager with nearly £400 billion of assets and strengths in a number of attractive growth areas. And our group is united by a common set of priorities. We remain focused on transforming performance, improving the client experience, and strengthening our talent and culture. Together, these priorities underpin our strategy to generate sustainable growth and create long-term value for our customers and shareholders. So, on to progress in the first half. Aberdeen has continued its positive trajectory through the first half of the year and I'm increasingly confident in our ability to deliver the ambitious 2026 targets we set out for the Group. Adjusted operating profit increased by 21% to £151 million and net capital generation increased by 47% to £163 million, benefiting from revenue growth, improved efficiency and the actions we've taken to unlock value from our pension surplus. II delivered another excellent result, increasing profit by 22%. In Advisor, profit was broadly flat. We've improved service levels and taken action to strengthen the proposition and improve the client experience. Flows remain a challenge, however, and I'll talk more on our plans to address that in a moment. And in Investments, We are delivering improvements in investment performance while continuing to focus on operational efficiency, with profits up 9%. These results demonstrate how better execution is translating into improved profitability. Let me now quickly review the businesses, starting with AI. AI continues to perform exceptionally well across its key metrics. Customer numbers increased by 14% year-on-year to 525,000, while SIP customers increased by 35% to 125,000. Net inflows reached a new record of £6.8 billion, with positive markets also lifting assets under administration to almost £108 billion. Trading activity was high, in fact above trend in the first half, with daily average retail trades up more than 40%. Importantly, we continue to improve our competitive position. Our repricing has landed well and brand awareness has increased materially over the past year. We are growing share across trading, assets and new accounts while continuing to attract high-value customers with average customer account sizes now over £200,000 which is approximately double the market average. We're also continuing to expand the proposition. The rollout of II360 and II Advice continues and there are further opportunities to attract and engage more investors on the platform, including services like II Community, which has seen membership double in the last year. Combined with our compelling pricing model, excellent service, and continued investment in the brand, we are well positioned to capture the long-term structural growth in UK wealth. We're all excited about II's growth prospects as we take a growing slice of a growing market.

Turning now to Advisor.

In Advisor, our focus through the first half has been on further improving and streamlining our proposition to our clients and their advisors. We've made significant investment in the platform, strengthened leadership with the appointment of Rich Denning, the CEO, and in July, earlier this month, we brought servicing in-house from FNZ. That gives us greater control and end-to-end ownership of the client experience. We're already seeing benefits in the actions we've taken. Our net promoter score is well ahead of target at plus 53. and customer satisfaction has reached 97%. This is because service performance has improved and straight-through processing has increased. Let me give one example. Firm onboarding times have improved by over 90%. At the same time, we're clear that flow performance needs to improve. The market has evolved with advisor consolidation, panel rationalization, and greater competition for transfer business all having an impact. So our focus now is on converting stronger foundations into sustainable commercial performance. We're sharpening our distribution strategy and deepening our relationships with strategic advisor firms. We have a developing pipeline of strategic partnerships and back book migration opportunities supported by our new and improved onboarding capability. and we're taking a disciplined approach to areas that create structural drag. As you know, we previously anticipated that a turnaround in flows would be achieved in 2026. We now expect this return to net inflows to take longer and we'll come back with more colour on this in due course. On this, Rich has already completed a detailed segmentation analysis with early highlights showing where we are growing and where we have work to do. Let me be clear, our conviction in Advisor is unchanged. The proposition is strong, the platform works well, and the operational progress we have made gives us a much stronger base from which to improve flows over time. Turning now to investments. The investments business made further progress during the first half, delivering increased profits, improved investment performance, and encouraging momentum in several specialist growth areas. AUM increased to 398 billion, supported by positive market performance. Three-year investment performance improved to 86% of assets performing against benchmark, significantly above our target of 70%, while one-year performance increased to 88%. We're seeing positive momentum in a number of our equity strategies particularly emerging markets and thematic capabilities, alongside continued strong delivery from fixed income, liquidity, quants and alts. We're also seeing encouraging momentum across our specialist capabilities. Real assets generated 1.4 billion in net inflows in the half. Our infrastructure also completed the successful first close of approximately £800 million for its flagship rail fund. In the wholesale channel, we have delivered positive flows in 10 of the last 12 months, with demand improving across equities, fixed income and commodities, as market conditions stabilised in the second half of Q2. Our emerging markets franchise continues to see strong client interest, supported by a number of 4- and 5-star rated investment strategies. Looking ahead, we remain focused on accelerating growth across our highest conviction opportunities, including private markets, closed-end funds and commodities, supported by deeper strategic partnerships. With the completion of the Stagecoach and MFS transactions and the forthcoming edition of Herald, we have further strengthened our investing capabilities and supported profitability. Our target of 100 million of adjusted operating profit in investments for 2026 was always an ambitious goal. That said, with profit for the second half expected to be materially higher than the first, not least reflecting the earnings benefit from our bolt-on acquisitions, I expect we will be broadly in line with this target based on annualised second half profit. A few words now on AI, a theme which is rightly at the front of mind for many investors. AI is emerging as a meaningful enabler of growth and efficiency across our group. Our aim is to invest and adapt meaningfully so that AI becomes a core part of how we operate now and in the future. Of course, whilst always acting in a responsible manner. What has particularly encouraged me is the enthusiasm of our colleagues. As we roll out Copilot Premium across the business, colleagues are embracing the opportunity to learn, experiment, and apply AI in their day-to-day work. We also have teams operating at a strategic level, deploying AI into products, software development and accelerating processes, building on some excellent work we've undertaken on unifying and structuring our data. Adoption continues to increase rapidly and colleagues are reporting meaningful time savings and improved outcomes. but it's premature to forecast how AI will affect the business or our markets. In fact, I don't believe anyone knows. What I do know is that our culture has embraced AI and the strong early adoption today across our group sets us up very well to benefit from artificial intelligence. And just a quick comment on progress against our group targets. For less than six months to the end of the current planned period, We're confident in our ability to deliver the full-year 2026 Group Targets which were adjusted operating profit of more than 300 million and net capital generation of around 300. The first half has demonstrated we're on track to achieve these targets. Our focus beyond 2026 remains on achieving our growth potential across the Group with sustainable profitability, supporting investment in the business and the dividend. all underpinned by a very strong balance sheet. As part of this, and as we set out at the time of our full year results, we expect 5% to 10% growth in net capital generation per annum over the medium term on top of our 26 targets, obviously without any major market irregularities. So thank you. With that, I'll hand over to Siobhan to take you through the financial performance.

Thanks Jason and good morning everyone. Let me take you through the financial performance for the first half of 2026, our capital position and our outlook for the remainder of the year. The first half of 2026 was characterised by strong financial performance across the group. We continued to grow the business while maintaining our focus on efficiency and capital discipline. The strong organic growth delivered by Interactive Investor stable profitability in advisor and continued cost discipline in investments all contributed to a significant increase in group profitability. As a result, adjusted operating profit increased by 21% to £151 million. IFRS profit before tax was £276 million, reflecting investment gains and interest income. Cost savings delivered in recent years and our ongoing focus on efficiency are enabling us to drive positive operating leverage across the Group. This has created capacity for us to invest in growth opportunities, improve client outcomes, support sustainable profitable growth and reduce costs in absolute terms in the first half. Capital generation was also particularly strong. Net capital generation increased by 47% to £163 million, benefiting from higher profitability, actions taken to unlock value from the defined benefit pension surplus, and materially lower restructuring expenses. In line with our policy, the interim dividend has been maintained at 7.3 pence per share. Dividend coverage has strengthened significantly, with adjusted capital generation now covering the dividend 1.39 times. The dividend is now also fully covered by net capital generation with coverage at 1.24 times. Let me now turn to the performance of the individual businesses, starting with Interactive Investor, where all figures exclude the financial planning business we sold in January. Sleazingly, Interactive Investor delivered another excellent period of growth and continues to demonstrate the strength and scalability of its business model. Total customer numbers increased by 14% to 525,000 and within that SIP customers grew by 35% to 125,000. Net inflows reached a record £6.8 billion up 66% year on year. The combination of these strong inflows and positive markets has seen AUMA increase by 15% to £108 billion in the first six months of this year. And this growth has also been reflected in financial performance, with revenue increasing by 22% to £173 million. Subscription revenue increased by 15% to £30 million, supported by continued growth in customer numbers. Trading revenue increased by 9% to £49 million. This was driven by record trading activity with daily average retail trades increasing by 42% to £35.7,000, more than offsetting the impact of the repricing and reduction in FX fees earlier in the year. Treasury income increased by 33% to £100 million, driven by higher average cash balances. The average cash margin in the first half was 234 basis points. The business has increased investment in marketing, technology and future growth capacity while continuing to do this in a disciplined way. Given the strong growth achieved and the inherent scalability of the business, key measures of cost efficiency have strengthened, with the cost to AUMA ratio now at 18 basis points. As a result adjusted operating profit increased by 18% to £84 million Turning now to Advisor AUMA increased by 5% to £85 billion supported by positive market movements As Jason has already outlined net flows remain challenging Net outflows were £1.3 billion in the first half compared with outflows of £0.9 billion in the prior year While growth inflows increased by 9%, this was more than offset by higher redemptions. Flow recovery therefore remains a key priority. Revenue increased modestly to £103 million, with growth in AUMA partially offset by the continued impact of strategic repricing and tiering, the combined impact of which was to reduce revenue yield to 25.3 basis points in line with our guidance. Expenses increased by 3% to £62 million, reflecting the end of the temporary third-party outsourcing discount that benefited the first half of 2025, as well as an increase in AUMA-related costs. Against that backdrop, adjusted operating profit remained broadly stable at £41 million. Looking now at investments. The business continues to execute against its priorities while benefiting from improved investment performance and ongoing cost discipline. Assets under management increased by 2% to £398 billion driven by positive market movements. Within institutional and retail wealth, net outflows excluding liquidity principally reflected the approximately £4 billion of lower margin equity withdrawals previously announced. These were partially offset by net inflows of £1.4 billion into real assets as well as net inflows into quantitative strategies and fixed income. Q2 net outflows of £0.5 billion do not include the previously flagged £1 billion of credit win which funded at the very start of July. Insurance partner net outflows improved significantly to £0.8 billion compared with £4.5 billion in the prior period. Revenue across the investments business as a whole was 2% lower at £363 million. Management fees were broadly unchanged, although revenue margins continue to reflect changes in asset mix. Other fees that are by their nature one-off and performance-driven, such as performance and development fees, were lower in H1. These are expected to be H2 rated. Importantly, costs reduced by 3% to £325 million. As a result, adjusted operating profit increased by 9% to £38 million. Turning now to capital generation. Adjusted capital generation increased by 26% to £182 million. This reflected higher profitability and a £19 million benefit from using the defined benefit pension surplus to fund defined contribution pension costs. In line with our expectations, restructuring and corporate transaction expenses were significantly lower year on year. This benefited net capital generation which increased by 47% to 163 million. Our capital position remains strong. Total capital coverage increased to 229% compared with 218% at the end of 2025. and remains well above our medium-term operating range of 140 to 180%. Given our strong capital position, we expect to redeem £210 million of Tier 1 debt at its first call date in December 2026, subject to regulatory approval. This debt is contributing circa 25 percentage points to the capital ratio of half one 2026. Turning finally to our financial guidance for 2026 as a whole. For interactive investor, we expect revenue growth to continue in line with growth in customers. While costs will increase in absolute terms as we invest in the business, we continue to expect a cost to AUMA ratio of below 18 basis points. In Advisor, profitability is expected to be broadly flat in H2, reflecting higher markets and growth in AUMA-related expenses. Investment performance in the second half will be stronger, benefiting from revenue associated with recent bolt-on acquisitions, higher market levels and expected other fees. Expenses will increase modestly, reflecting investment in growth opportunities and AUMA-related costs. At Group level, we are confident in delivering our 2026 full year targets of adjusted operating profit of more than £300 million and net capital generation of around £300 million. The year on year improvement in Group AOP versus 2025 is expected to be predominantly revenue driven with expenses broadly in line as we continue to invest in growth. And with that, I'll hand back to Jason.

Thank you Siobhan, and just let me complete with a few comments. Aberdeen has continued its positive trajectory through the first half of the year. We've improved profitability, strengthened capital generation, and continued to execute against our strategy. The strong performance of Interactive Investor, improving momentum across investments, and the continued strengthening of Advisors Foundations give us greater visibility and confidence as we move into the second half. Consistent execution remains central to achieving our ambitions over the remainder of the year. Delivering our 26 targets will demonstrate the strength of our business, the commitment of our people and lay the foundation for Aberdeen's next phase of growth. While we can take some satisfaction from our progress, we are still far from where I want Aberdeen to be. Our focus remains on delivering better outcomes for our customers and clients, improving performance further across the group and creating lasting value for shareholders. With that, I'll close and we'll move on to your questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. We'll pause for a brief moment. Thank you. We will now take our first question from Nicholas Herman of Citi. Your line is open. Please go ahead.

Yes, good morning. Thanks for the presentation and taking my questions. A couple of questions from me, please, on advisor and investments. So on advisor investments, I guess there's a couple within this one but you said Rich Denning has identified where you need to do better can you provide more detail there where his key focus areas will be in the short term as you work towards net positive inflows and the second one on advisor is now that you've had the pricing cuts does that mean that the margin should remain at around 25 basis points going forward The final question on investments flows and specifically equity. It's encouraging to see the strong improvement in equities performance and also an increase in gross inflows but equally the outflows have continued. I'm surprised to see net outflows increase in EM and Q2 in particular. Could you talk about client engagement and the pipeline equity and how you expect your equities flows to trade point here, please. Thank you.

Thanks, Nicholas. I'll take them in the order that you asked them. So in Advisor, I'm delighted Richard joined us. We've done a, as you'd imagine, a new CEO would come in and think hard about how we're trading and what we've segmented broadly the market into Group Plc Group Plc Group Plc Group Plc and what we need to do is engage with firms and the shareholders of these firms and of these families of firms to make sure that we engage them in the way that they want to trade to serve them better and frankly to be more commercial in the way that we face into that and that will give us opportunities in back book migrations in particular with some of the bigger firms that we have relationships with at the same time this work has gone on to improve the performance and there's an engagement around other firms to make sure that we have got that prized first position on the panel. And that just requires a little bit of reinvigoration of how we face into the more regional IFA market. I think on the margins, yeah, we did sort out our go-to-market price. I mean, there are deals also that are required. I think I think it wouldn't be the case to see that revenues would be flat. I think you would expect a degree of competition to continue and that would manifest in some basis point reduction over, say, a three-year period in revenue margin. I couldn't be more precise than that, but I would expect some of that competition to manifest itself in slightly lower revenue margins. at the same time where you've got growth in AUO from markets and from flows.

I think just to add, so we've given guidance of 25 to 26 in the past. We are at 25.3 for this first half. So you have some of the impact of the repricing from last year still coming through. also in this business you get the impacts of tiering so what I'd expect as AUMA grows for the tiering to impact so you will expect some natural some natural kind of movement in that as the AUMA grows That's helpful so just to clarify it sounds like Rich agrees with you that pricing is now in the right place and now it's much more around

The standard price, that's right, but we'll continue to grow it so that the commerciality of the business will continue. Okay, on the flows, as we talked about, Q1 for equities, which obviously is the main part of the first half, and it was tough. We did lose a couple of mandates and an investment trust that we talked about on the previous call. We've also, in Q2, we did have one client actually redeemed, but we expect them to reinvest in a similar equity strategy in the second half, and there's quite a large We're supporting them through a restructure that has gone out, but we expect it to come back in. I think more broadly, particularly the Gem income product has been selling very well, wholesale and institutional. So that's continued to do well. The performance of both value and income across the Immersion Master products has improved significantly over the last 12 months. and that's been supported by better commercial outcomes I think across the piece we do expect the second half to be better and rightly so so we do continue to face into that and make sure but as I said we've got some specific wins in the pipeline that we do expect to fund in H2 we've got much better performance in the wholesale channel you can see some of that in the gross flows in equities is coming through the wholesale channel. So we are giving ourselves up for a better second half. Thank you.

Thank you. I will now take our next question from Hubert Lam of Bank of America. The line is open. Please go ahead.

Hi. Good morning. I've got three questions to an I.I. and one on investments. Firstly, in I.I., I saw that the cash margin was 234 basis points. I'm just wondering how sustainable this is and whether or not you have guidance on this for the cash market for this year and next year. And also related to that, cash balances have also come down quarter and quarter. I'm just wondering what's dropping that. Second question on IAI. I know you've given the guidance on cost there being less than 18 pips. I'm just wondering about how we think about cost growth and offering leverage in IAI from here. And lastly, on investments, I noticed also that the fee margin went down to 18.5 basis points. I think previously you got about 19 basis points a year. I'm just wondering if that's still the case and how we should think about the second half. Thank you.

Okay. I'll take the II ones and then the 200 investment ones. So I think the cash margin was slightly higher. We did see, I think everybody knows, quite a significant change in the expectations for short-term interest rates during the half. So we were slightly above trend. I think our long-term guidance of 2.1 to 2.2 approximately stands. I think we have been above that. I think we'd probably be slightly above that in the second half. But we will stick to that as a guide. But within that range, we're not trying to sort of fine-tune every basis point. But that is, I think, a reasonable guide. The cash balances were actually slightly high at the end of March. I think broadly on trend, I think at around 8% of AUA at the end of June. Why were they high at the end of March? Well, two reasons. One, we had extremely high transfers coming in. Some of them come in cash, some of them come in specie, but that was a particular high point. We saw a lot of activity in Q1. And secondly, of course, we were still in the first throes of the conflict in Iran, and we saw some investor hesitancy just to put the money to work. Some of that's now taken place, as you might expect, during Q1. Q2. But we would sort of guide the cash as a percentage. As market levels have gone up, cash has come down a little bit, just arithmetically. So it's around 8%, but we think we've said in the past 8% to 9%, and that's about right. Aggressive margins, Sean?

So on the investment margin, so you're right, it was 18.5 basis points. Within that, actually, there are a couple of moving parts. So the INRW revenue margin actually went up a basis point and the insurance down. The insurance partners one is driven by asset mix, asset allocation and winning in the DC business. If I look forward, we're still guiding to around that 19 basis points. We have got the two acquisitions that are coming in. MFS is around the average. The equity margin is around the average of the book margin there. And the Herald Investment Trust will be around 100 basis points. So that gives you kind of some guidance for the second half of the year on the 19.

And then just back on II costs. Our guidance is below 18. We are continuing to invest in growth. But if you just do the arithmetic on the cost to spot, you'll see that number lower. We guide on an average basis. So I think we will continue to sharpen that. But the The trend of that figure, I'm not seeing a huge step down, but I think you could see that trending down over time as the platform grows. But the priority is to invest in the brand and in the proposition to make sure we can continue to grow. But we're already extremely efficient. That is a key feature of our competitiveness and I and the whole II team will continue to protect that.

Great, thank you.

Thank you. And we will now take our next question from Charles Vended of Rothschild & Co, Redmond. The line is open. Please go ahead.

Hi there. Thanks for taking my questions. I've got one on I.I., one on cost, and one on capital coverage, please. So the one on I.I., I was wondering, you saw darts increase to 35,000, 36,000. in the period and trading revenue go up 9% with depth despite the repricing. So wondering how you think about taking pricing even lower possibly to zero as the online brokers did in 2019 given the considerable amount of revenue you generate on FX. Just keen to hear your thoughts on the extent to which commission repricing not just the fixed fee model drives your competitive positioning and market share gains. Second question on costs. So you said you're targeting lower absolute costs whilst investing for growth. Where's that cost flex actually coming from and how much further do you think the cost base can be reduced before it starts to grow again in line with wage and general inflation? And then thirdly on capital coverage, 2% to 9% against the 140% to 180% medium-term target. So you highlighted the 210 million tier one redemption planned for December. What can we expect in terms of buyback or special return beyond that? Thank you.

Okay. Let me start on II. Was your second question on the group or II costs, just so I'm clear? It was on the group, slide 12. Okay. I'll deal with the II question first, and Siobhan can cover the second two. Our proposition isn't purely to try and win trading business based on teaser rate commissions and then like some of the other online brokers as you mentioned and try and sell them other things, CFDs and the like. We are in the long-term savings and investing business. So we have a package. The judgment that Richard and his team made to adjust the pricing has served us very well. It's landed very well with clients. We've sharpened the proposition. We sorted out the pricing in FX and we continue to have an attractive proposition across the whole piece. And obviously our price competitiveness, certainly in the anything above 25 to 50 K above that level is incomparable to the rest of the market and that is attractive and it's also allowing us to drive trading. We continue to sharpen that, but we do see, I think in the first half we did, I think we probably saw above, as I said, above trade, above trend trading. That's slowed down a little bit in July, back more to trend. It's not falling off a cliff, but it's slowed down. So our expectation once the pricing and the market conditions sort of settle down is to continue to grow that but we're not in the we continue to be very competitive and we continue to make sure that clients do see the benefit of the proposition as a whole Just on costs so we have as we said on the slides on slide 12 as you referenced costs have reduced in the first half in my final remarks on

And we're pleased to see that reduction that's come through in investments and in corporate costs. Clearly, we've seen some growth in costs in II. As Jason has just said, we're continuing to invest in that. As we look into the second half, we expect the expenses to, in an absolute level, be flat. The benefit of the transformation costs have come through. We are seeking to invest in growth opportunities, there will be some natural AUM related costs that will increase and I'd expect the second half costs to be slightly higher due to things like performance driven VC coming through in the second half so that gives you where the expenses are so we're very pleased with the performance in the first half and the second half will see some natural changes as the business grows Capital On capital we have, as we have said today, we are looking to pay down the tier one debt. When we spoke at the year end, when we look at our capital usages, it's been to look at repaying our debt as we have higher levels of debt than we would like and what we've looked to do, what we'll secondary do is look to invest in the business so where we see opportunities either organically or inorganically we will invest our capital in that regard so those are the key ways we're looking at usages of our capital in the medium term I think from a return perspective

The dividend is now covered by net capital generation and covered by adjusted for a while, but part of the plans that we put in place was to grow the fundamental capital generation at all costs. That has grown 47% in the first half. on track to hit 300 for the full year. So getting the balance between the balance sheet, which has been very strong, and will be with lower debt going into next year, with the capital generation higher, we continue to pay out a high dividend relative to earnings. But that's okay because of the strength of the balance sheet, but we certainly aren't planning anything else at this stage.

Thank you. Once again, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. We'll pause for a further moment. Thank you. With no further questions on the line, I would like to hand it back to Jason Winter for some closing remarks. Thank you.

Nothing to add really, but thank you all very much for joining. As I said, I think we've had a strong performance in, frankly, a very, as I call it, dynamic but eventful first half, and we look forward to continue to update you during the second half. Thank you very much.